Market Overview

Following stronger than expected growth in 2007, the Polish IT market is expected to be among the region’s fastest growing IT markets over the next few years. The IT market is expected to grow at a CAGR of at least 11% between 2007 and 2012, with IT services the best performing segment.

The PC market will remain buoyant, with falling prices of computers, particularly of notebooks, driving demand. There will be particular opportunities in key sectors such as banking, telecoms and manufacturing. Government IT spending started to revive last year and some major projects are expected in 2008. With new EU funding coming online, some EUR35bn is expected to be available for public investment in ICT over the period through 2013.

The total size of the IT market is now projected to increase from US$6bn in 2007 to around US$10.1bn in 2012. Spending by banks alone accounts for as much as 15% of the whole IT market and is expected to maintain double-digit growth. SME spending is projected to grow around 10%. While economic growth is expected to slow slightly over the medium terms, companies in many sectors have a greater focus on applying IT to streamline and optimise business processes. However, the ongoing fallout from the US subprime market presents a general risk that a contraction in bank lending will hamper the availability of consumer credit and long-term loans, in turn weighing on consumer expenditure.

Industry Developments

Poland’s National IT Infrastructure Plan for 2007-2013 factors in a large boost in EU funding. The plan, formerly adopted by the Council of Ministers last year, provides a framework for IT development in the public sector as well as society at large. Some 75% of funds spent on government IT projects over the next five years are expected to come from the EU. Among the most eagerly awaited tenders is likely to be one for a medical service system for the health ministry. The value of the project is estimated to be around EUR200mn. Other projects include a new system for e-declarations and e-taxes as well as plans to computerise land registers and schools. Local governments are to receive an additional EUR25bn from Brussels.

Company News

About 3mn computers were sold in Poland in 2007. Market leader HP had more than one-quarter of unit sales in 2007, but all major vendors except Optimus reported increased sales. Strong PC sales growth in Poland and CEE has attracted more direct investment from some PC vendors. Already as many as twothirds of units sold are assembled in-country. The domestic IT sector has been subject in recent times to a wave of mergers which looks set to continue. In March 2008 the long awaited merger of Asseco Poland and Prokom Software finally took place.

The merged company, which will use the name Asseco Poland, will be one of Poland’s largest homegrown IT companies. In 2008, Asseco Poland targets PLN250mn net profits on revenues of PLN3bn in 2007. IBM has for the first time included Poland in a list of key exceptionally high-growth developing markets. In 2007 IBM’s Poland unit beat the much touted BRIC countries (Brazil China, India and Russia) for growth. As a result Poland will receive additional investment from IBM in sales support, services centres and takeovers.

Computer Sales

Hardware remains the dominant category of IT spending, with hardware sales amounting to about US$2.5bn in 2007, and with spending projected to reach US$4bn in 2012. PC sales are forecast to increase from US$2bn in 2007 to US$3.2bn in 2012. The share of IT spending accounted for by hardware is expected to fall to 40% of the total by 2012. However, hardware spending will continue to be higher in Poland than in more established markets because of the amount of older legacy technology still in place.

Software

The software sector amounted to an estimated US$1.3bn in 2007, and is likely to grow to US$2.2bn by 2012, giving a CAGR of 11%. Despite persistently high levels of software piracy, growth has been strong over the past few years, with high computer penetration in the enterprise sector suggesting continued growth. One factor boosting sales in 2007 was the release of the new Microsoft Vista operating system. Microsoft planned to sell more than 300,000 licences of Vista in Poland in 2007, but at least three times as many will sell bundled with new computers. SAP remains the leader in an enterprise segment where the top four players, which also include Oracle, Comarch and IFS, account for more than 60% of revenues.

Services

IT services, worth an estimated US$2.2bn in 2007, is the fastest growing sector of the IT market, with spending expected to rise to US$3.8bn in 2012. With a larger installed IT base, acceptance of the need for IT services is spreading through many organisations. While banks and telecom companies are still the main spenders on IT solutions, apart from the public sector, the power sector is emerging as a fast growth sector. Privatisation and industry consolidation are the main drivers of the increased spending levels in the sector, which contains several large companies. Leading local player Comarch has estimated that 2007 spending by this sector on IT solutions could have been as high as US$667.8mn, double 2006 levels.

Special Focus: Outsourcing

In the last 12 months outsourcing has emerged as the fastest-growing segment of the IT services sector, as highlighted by the recent US$52mn deal between Telekom Poland and EDS (see Competitive Landscape). Employment in outsourcing is estimated to have grown by 167% in the past 1-2 years, with local attractions for global companies including language and accounting skills and low wages. IBM is establishing a new service centre, the European technology consulting giant CapGemini recently announced plans to take on an additional 150 employees, and Volvo recently joined a growing list of companies choosing Poland for IT outsourcing. Many multinationals such as BMW, DaimlerChrysler and Deutsche Post are outsourcing IT work to companies operating in Poland. Meanwhile, others have established service centres and call centres, including Lufthansa, Hewlett-Packard (HP) and CapGemini.

E-Readiness

The number of internet users, which reached around 14.3mn in 2007, is expected to rise to 18.8mn by 2012. The number of broadband subscribers in 2007 was estimated at around 8mn. The internet market continues to be constrained by high telephone charges and relatively low levels of computer penetration. Moreover, there are wide regional disparities, with internet penetration about twice as high in urban as in rural areas. A recent Forrester survey revealed that, while overall online banking uptake and PC availability remain low, Polish internet consumers already match Southern Europeans in buying online. Poland even outperforms Spain, with 30% of online consumers having previously purchased something online, compared with just 29% in Spain.